"If you are so married to your concept that you won't let anyone else touch it, then franchising may not be right for you.". "If you're thinking either 5 percent or 6 percent royalty, for instance, the difference doesn't sound big," he notes. When the right concept is franchised effectively, it can be a great expansion strategy that doesn't require as much up-front capital as growing through company-owned units. These questions can only be answered after evaluating your business and determining how franchising fits with your specific goals and objectives. Franchising allows a business to operate under the established brand of another business. Go over your personal finances and assets so you can start looking for opportunities in line with your price range. Lillians now has a full-time staff of seven. NEVER let anyone talk you into franchising a business. Your training programs and other support efforts will create quality control, notes Siebert, making sure the brand provides a uniform experience no matter which unit customers visit. When you submit it, be prepared for authorities to critique the document and possibly demand additional disclosures before they approve your application. Home » Franchise Your Business » How to Franchise a Business, The Services and Process of Franchising a Business for Start Up Franchisors. Yeah, you need to be careful about them but work hard for the brighter sides. Without ongoing training, it's pretty easy to institutionalize wrong behaviors.". Owning a franchise can be a shortcut to success when you're starting a business, but there are franchising advantages and disadvantages to consider. It also can cost $100,000 or more, so ask yourself if your company has the financial resources. Once the prospect has been identified, the franchisor will also require marketing tools to assist it in the sale of franchises. Request a free video on how to franchise your business, and we'll have the right franchise consultant contact you. "Ask yourself if you're comfortable having a role as a teacher and salesperson, selling and supporting franchisees," Siebert says, "as opposed to going out there and doing it yourself.". "Is it just one great restaurant and mama's wonderful pizza sauce?" But here - at the point where you begin supporting your franchisee network - is where a chain ultimately succeeds or fails. But becoming a franchisor is not an automatic ticket to success, especially in this challenging economy. View a full list of franchise consulting services we offer, or contact us to learn more. If assistance is needed to view any content on our website, please contact us directly. Continuing his latest series, Grid Law founder David Walker explains every aspect of the franchising process for small business owners looking to franchise their company. (Companies seriously considering franchising are well advised to seek the counsel of a knowledgeable franchise professional prior to initiating any franchise efforts. If you’re running a successful small business and have ambitions to grow, you have several options. "Can you clone it? The founding sisters still do all the buying for the growing chain, but Deuser says growth means they are already looking into hiring a second trainer. Know your budget. FRANCHISE SALES TRAINING. You will make money from an initial fee (franchise … Other considerations include staffing resources and the proposed franchising support system. Don't rely on your gut feeling that your business would be a smash hit across the country. Computer-based tools and programs are highly effective, as are training videos, and can be used for the franchisee, for the franchisee’s employees, and for corporate employees. Your salespeople should know your business well and be able to tell a compelling story about why you're a worth the investment of their time and money. The Ultimate How-To Guide on Franchising Your Business. The main differences between licensing and franchising are that with a licensing agreement you have a lot more control over how your business operates, looks, and feels. Of course, the new company will also need to sell franchises. FRANCHISE MARKETING PLANS. If you want to sell in one of these states, you'll need to meet their requirements as well, at additional cost. The first question to ask is whether your business is suited to being franchised. UNC Press Books, 1992. International Franchise Association. If the decision to franchise a business is made, a franchisor should develop a business plan outlining the company’s growth and strategy for the next five years. For small business owners, franchising is a way to expand more quickly and cost-effectively than opening further company outlets, by granting people (franchisees) the right to run their own business under your brand and systems. Then, quit your job, give up your security and benefits, and go into a business you've never been in before. © Copyright 2004-2020, The iFranchise Group Inc. All Rights Reserved. "Ask youself, is the concept salable?" Allow at least 6 months and an initial investment of between $25,000 and $35,000. There should be an expectation that more units will create economies of scale and increase profits. Here's our guide to the important steps you'll need to take along the road to becoming a new franchisor. Remember that while franchising allows you to grow fast, it also means giving up most of the franchise units' future profits, Shay says. As a franchisor, you'll have gone through a lot to reach this point. Be careful to note whether geographic variables such as weather or local laws may affect franchisees' success. Just because you qualify to sell franchises doesn't mean you will find buyers. There's also a lot of legal paperwork to wade through to make sure your business complies with federal and state laws that regulate the franchise industry. If not, give our input some … If you’re reading this article, you’re probably considering franchising as a method of expansion for your business. Lillians is unusual in that the company has sold all its franchises by word of mouth and doesn't have a sales representative. Franchising a business takes time and some initial investment. - Michael Messer, Marketing Manager, Bridgestone/Firestone, Franchise Operations Manuals and Training Programs, Franchising or Expanding a Dealer Program, Read more on the importance of having outside independent franchise legal counsel, Election Results Positive For Franchising, What Restaurant Franchising Will Look Like in the Coming Year, How to Grow Your Business Through Franchising: The Franchise Freedom Podcast, About the Author: Mark Siebert, iFranchise Group CEO & Senior Franchise Consultant, iFranchise Group Receives Top Franchise Advisor Ranking Again - September 2020, Experts in Franchising Industry Predict Huge Rebound in Restaurant Franchise Sales - July 2020, Franchise Expert Predicts Dramatic Rise in Franchise Sales Following Pandemic Shutdowns - June 2020, iFranchise Group Ranked Top Franchise Advisors by Entrepreneur Magazine - September 2019, Franchise Experts Support Current Joint Employment Initiatives - December 2018, Great American Franchise Expos - biweekly July-December, 2020, IFA Annual Convention - February 16-18 & 23-25, 2021 (Virtual Event), International Franchise Expo, New York - June 17-19, 2021, Franchise Expo West, Phoenix - September 30 - October 2, 2021. This manual will serve as a sales tool demonstrating franchisor competence to new prospects, as a training guide for new franchisees, as a reference guide for established franchisees, as a “liability limiter” for the franchisor, and as a legally binding quality control device for the entire chain. These legal requirements are relatively easily met through the use of an attorney with substantial franchise experience. Other options might be partnerships, private or public growth as a corporate owned chain, business opportunities, or distributorships, among other choices. FRANCHISE MARKETING TOOLS. Small Business Obtaining Financing Entrepreneurship 101 … In the FDD, you'll be asked to provide a wide range of information about your business, including audited financial statements, an operating manual for franchisees, and descriptions of the management team's business experience. How Long Will It Really Take? Cleveland-based franchise consultant Joel Libava says he likes to see companies with at least a couple of profitable units beyond the first one already in operation before a company tries franchising. And you've signed a 10-year contract.". The Balance Small Business Menu Go. The iFranchise Group provides all of the franchise consulting services listed below, and can customize a program to meet your specific needs and budget. 1. While the FTC essentially just files your FDD away, you'll need to wait state approval. Just because your five-month-old Mexican restaurant is selling out every night doesn’t mean it’s time to think about franchising. A franchisor needs certain new capabilities and will need to be sure that these capabilities are seamlessly integrated into existing organizational functionality. "Trust that you're going to need a lot of money for marketing," he says. “You need to have everything figured out,” he says. The initial investment is a once-off fee. The arrangement is spelled out in a set of documents that define the relationship between both you and the franchisee. Mistake No. The tools necessary for franchising a business can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company’s ability to sell in certain states for another three to four months. The company has also entered into a partnership with the national franchise-consulting chain FranNet, whose consultants may present the company to their prospects. Step One: Step One: Evaluate if Your Business is Ready, Step Three: Make Important Decisions About Your Model, Step Four: Create Needed Paperwork and Register as a Franchisor, The size territory you will award each franchisee, What geographic area you are willing to offer, The type and length of training program you will offer, Whether franchisees must buy products or equipment from your company, Whether you want an owner-operator for each unit or area/master franchisees who will develop multiple units. To help stimulate interest, the company offers a $1,000 referral fee to anyone who sends the company a new franchisee. The franchisor will also need to maintain ongoing compliance (keeping registrations in force while actively selling) and will need to be able to document compliance with state and federal law on an ongoing basis. It took the bargain-fashion-accessory company a full year and cost more than $100,000 to qualify in 45 of the 50 states, she reports. Whereas starting a business often comes with a lot of unknowns, a franchise is proof of a successful model already in motion. To ensure successful franchisees and maintain quality control, the franchisor will need to develop a state-of-the-art operations manual for its franchisees. The cost of a well-designed program varies substantially, depending on the strategy chosen and the desired speed of expansion. 2. If you're considering franchising your business, know that the process of becoming a franchisor is usually long and involves considerable cost. This will require a specific marketing plan designed to get the franchisor’s message to the targeted franchise prospect. Still, many business owners dream of seeing their brand become a household name, with a network of franchisees from coast to coast or around the globe. Other common sales techniques include attending franchise fairs or hiring independent franchise marketing firms to help locate investors. iFranchise Group is continually working to improve website accessibility. Depending on your situation slower growth, finding debt financing or taking on partners are all alternatives that may prove better ways to move forward. Franchising your business allows you to have independence from the day to day running of your business, and focus on the bigger picture, while supporting and collaborating with your network of franchisees to create a successful and valuable business. The business model should be presented to the potential franchisees. The first thing you should know is that there is always an upfront franchise fee, and franchisors often have financial requirements for whom they’ll allow to open one of their franchises. The tools necessary for franchising a business can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company’s ability to sell in certain states for another three to four months. Is franchising the right strategy? Now that you're in business as a franchisor, one of your most pressing activities will be to find franchisees and convince them to buy your concept. Is this business franchisable? STRATEGIC BUSINESS PLANNING. The company also hired a trainer and a full-time "franchise advocate" to answer franchisee questions and resolve any problems. Franchising your business is a proven route to rapid growth. At the same time, you'll need to start marketing the growing chain to drive sales to franchisees. Franchising your business will require a certain level of investment. The first step in determining whether or how to franchise a business involves two key questions: 1. Franchisor Cindy Deuser, 51, co-founder of five-year-old franchisor Lillians Shoppes, says the rule binder her home state of Minnesota provided was two inches thick. This will assist them to build the successful business. "Franchisees won't do it exactly the way you would, even if they do it well," says IFA president Matthew Shay. Franchise Your Business in 7 Steps; Step One: Step One: Evaluate if Your Business is Ready; Step Two: Learn the Legal Requirements; Step Three: Make Important Decisions About Your Model Franchisors make all the costly mistakes proving the model so you don’t have to and they support you throughout your set-up and ongoing development. Does it provide good returns? "Or did you keep growing?". Similarly, if you're planning to expand your business, a well-managed franchising … Becoming a franchisor means you'll be engaged in entirely different activities than you were as a business owner. If a consultant is encouraging you to franchise your business (which will be true in most cases) rather than asking lots of questions, you have to start wondering why. The first step in franchising a business is preparing a business plan that will consider the structure of the franchise, the profile of the franchisees and the territories that can be allocated to franchisees. Voted #1 Franchise Consulting Firm by 700+ Franchisors. In January, for instance, three established franchisors filed for bankruptcy protection: Taco Del Mar Franchising Corp., Uno Restaurant Holdings Corp., and Daphne's Greek Café. Libava asks. If we can be of assistance, please contact us: [email protected] | (708) 957-2300. Making it so that someone (a franchisee), who is interested in operating your same business in their own market, can do so. Altogether, a new franchisor can anticipate that the franchise program should take between six months and a year to fully implement. Once you've made the important decisions that shape how your franchise will operate, you're ready to complete your legal paperwork. Franchises are an extremely common way of doing business. FRANCHISE OPERATIONS MANUALS & TRAINING PROGRAMS. Own Your Own Business If you are a self-motivated individual who is ready […] 4: Franchising too soon. Franchising is a more risk-free business endeavor for newbie entrepreneurs because they don’t need to build a brand and an audience. UNC Press Books, 1992. You might be considering franchising as a result of your own research into expansion options for your business, or (as is often the case) you might be considering franchising because you have been approached by others who are interested in buying a franchise of your business. In addition, franchising your business will require that you relinquish some of the control you've had over how your concept is executed. Lillians' Deuser says she and her sister/partner Sue Olmscheid, 45, ran many business-model scenarios with their franchise attorney before settling on their $25,000 franchise fee, 7-1/2 percent royalty and 10-year contract term. Siebert boils down the issue this way: "You're saying, 'I want you to give me all your money. As with so many things, do your research. Franchising your business just like every other strategy or plan in business has brighter sides as well as darker sides. To begin franchising, your business has to have a successful, proof of concept. Most successful franchises take a business that's already profitable and try to replicate that success in other locales. California and Illinois are generally regarded as having the most daunting registration process, says Libava. To be legally entitled to sell franchises, the franchisor will need guiance on developing a franchise agreement and a FDD (Franchise Disclosure Document), and will need to file with appropriate state authorities on a national basis (23 states have such requirements). As we navigate these challenging times, our thoughts are with our clients, colleagues and coworkers, and with the business and franchise communities as a whole. At Solar Universe, Bono says they've hired two in-house salespeople to handle franchise marketing. A franchise business is a business in which the owners, or “franchisors”, sell the rights to their business logo, name, and model to third party retail outlets, owned by independent, third party operators, called “franchisees”. Franchise Update Media has its finger on the pulse of franchising with unrivalled audience intelligence and market driven data. Franchise a Business The franchise industry presents many diverse investment opportunities for people looking to go into business for themselves but not by themselves. Inadequate training can leave your franchisees ill-equipped to implement your system successfully. In order to legally sell franchises anywhere in the United States, your business must complete and successfully register a Franchise Disclosure Document with the Federal Trade Commission . "If you're a restaurant operator and employ 20 people in a unit," he notes, "you have thousands of new employees going through the system every year. They also are part of branding efforts. In the case of San Francisco Bay-area solar-panel installation franchisor Solar Universe, the company is selling franchises in concentric circles moving outward from its headquarters, mostly in warm-weather states with high electricity costs and generous state green-energy rebates, says founder Joe Bono, 36. Protect yourself, your money and your future. Franchising Definition: The term ‘franchise‘ is understood as an exclusive right conferred by the parent organisation to an individual or enterprise to use the former’s successful business model, in stipulated areas.Franchising is a business relationship; wherein the owner authorises another party to use their brand, product, business system and process in return for adequate consideration. To advise and assist in this process, consultant Libava recommends hiring an experienced franchise consultant or franchise attorney. An efficient business model blamed by some for low wages, franchising squeezes small-business owners between corporations and workers. I understand that the data I am submitting will be used to provide me with the above-described products and/or services and communications in connection therewith. If you want to start a business, buying into a franchise may be a good alternative to starting a unique venture. LEGAL DOCUMENTS. Your sales are boosted more than you can even imagine. Copyright © 2020 Entrepreneur Media, Inc. All rights reserved. They seem to have hit a winning formula--Lillians has grown to 32 shops in its first two years as a franchisor with its unique concept, in which stores are only open a few days a month.

franchising a business

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